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Introduction
Have you ever wondered how investors build their portfolios with such confidence that they can quit their day jobs? Have you wondered how investors think, which gives them huge returns even when they seem to have invested in irrelevant stocks, properties, or financial instruments that are losing value? Finally, I've figured it out, friends! It's rather simple to understand, but harder to practice. I'd love for you to stick with me to the end as we explore havens and how investors think.
Haven Definition
Being an investor always means putting money into some kind of asset that's about to experience an increase in value. But the question is, do such assets exist, and how can you spot them early? To understand this, you need to know what a haven means.
A haven is simply a place of safety, similar to the word "sanctuary."
From this definition, investors look for financial havens and invest heavily in them because people usually can't do without them or flock to them during crises. To understand more, let's look at my definition of a financial haven:
A financial haven can be defined as an asset that gains more value in a troubled economy. It's seen as an asset with more security than others.
This definition covers all original assets (the first type of business in an industry) that remain relevant and all assets of great value that grow steadily regardless of economic situations in the long run.
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How to Identify Havens
To identify financial havens, I urge you to read the definition above thoroughly, meditate on it, and follow these steps:
- Make a list of worldwide, national, state, or local problems that exist and are coherent.
- Look for solutions online, if any, and pick the most renowned.
- Perform a feasibility study on the asset to understand why it's effective.
- Find other assets capable of similar growth that are cheaper or more expansive, and invest if possible; otherwise, watch that asset and invest when there's a downturn, waiting for an upward movement.
Note: To truly apply these steps, study hard and wide, and be creative in each step for it to be effective.
Historical Financial Havens
Most investors, especially conservative ones, tend to stick with assets that have a track record, already proven to be havens. These include:
- Precious metals: This includes gold, silver, and many others, which most investors turn to during times of economic uncertainty.
- Real estate: This involves all forms of investing in land and buildings. Investors usually invest in these in a particular way, which you can learn. Land is well-known to increase in value yearly.
- Equities: Investors usually invest in a well-developed stock market, containing various listed companies in various sectors, and profit from them as the companies grow.
There are many other financial havens out there, and the more you shape your investing knowledge, the more you'll be able to identify these havens and improve your wealth and quality of life.
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Importance of Investing in Havens
Some assets have a higher degree of being a haven. Once identified, the following is true for assets with 60% haven attributes:
- Boosts investors' confidence
- Builds wealth consistently in the long run
- Brings about financial peace in the long run
Challenges Faced in Investing in Havens
- Ascertaining the degree of its haven attributes: Some assets have a lifespan, after which they become obsolete. Each investor needs to understand an asset's lifespan and play accordingly.
- "Investor's pride*: In the long run of successful investing, which consists of proper execution and exiting, one might start predicting the market instead of following the actual behavior of the market. This leads to making decisions without much analysis, resulting in failed investments.
- Other psychological factors: Such as FOMO, worrying, and greed will affect proper execution and exiting, making a financial haven look like a bad investment.
Conclusion
I hope you enjoyed reading and are highly motivated to seek financial havens and try them to boost your investment skills and portfolio.